The World Federation of Exchanges (WFE) has called on financial regulators to tighten oversight of tokenized stocks, warning that the products could expose investors to hidden risks and undermine trust in traditional markets.

Reuters reported on Aug. 25 that WFE warned that tokenized equities replicate the appearance of stocks without conferring the same rights or protections that shareholders typically receive.

Unlike conventional shares, tokenized versions allow investors to gain synthetic exposure to a company’s performance without holding legal ownership.

The WFE said this marketing approach risks confusing retail investors, who may assume they hold voting or dividend rights when they do not. If these products fail, the group cautioned, the reputational fallout could extend to listed companies, damaging broader market integrity.

The WFE urged regulators to expand securities laws to cover tokenized assets to prevent such outcomes. It recommended clarifying rules around ownership and custody while restricting the promotion of these instruments as “stock equivalents.”

The industry body outlined its concerns about the fast-growing sector in a letter to the US Securities and Exchange Commission, the European Securities and Markets Authority (ESMA), and the International Organization of Securities Commissions (IOSCO).

Tokenized stock rises

The WFE’s intervention comes when tokenized equities are gaining momentum across both crypto-native and mainstream platforms.

Over the past months, prominent crypto trading platforms like Robinhood, Kraken, and Gemini have rolled out tokenized versions of U.S.-traded stocks, offering retail users new ways to gain exposure outside traditional brokerage channels.

That rapid surge in adoption has attracted significant bullish forecasts, with Binance Research estimating that the sector could reach a $1.3 trillion market capitalization if just 1% of global equities moved onto blockchains.

Despite this bullish forecast, tokenized stocks remain a fraction of that potential. Data from RWA.xyz shows the sector holding about $360 million in market capitalization, making it one of the smaller segments of real-world asset tokenization.

Nonetheless, its proponents point to the rising demand from retail and institutional investors as evidence that the market could scale quickly once regulatory clarity arrives.

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Federal Reserve (Fed) Governor Michelle Bowman is urging US regulators to abandon their “overly cautious mind-set” regarding cryptocurrencies, blockchain technology, and artificial intelligence (AI). 

Speaking at the Wyoming Blockchain Symposium, Bowman emphasized the need for a proactive approach to adapt to emerging technologies, marking a departure from the more conservative stance of previous regulatory bodies.

Bowman Advocates For Flexible Oversight 

Bowman, who was nominated to the Federal Reserve Board by President Donald Trump in 2018 and appointed as Vice Chair for Supervision earlier this year, stated, “Despite this past inertia, change is coming.” 

She underscored the importance of choosing to embrace this change and creating a regulatory framework that is both reliable and efficient. “We must ensure safety and soundness while incorporating the benefits of speed and efficiency,” she asserted. 

The choice is clear from a regulator’s perspective: we can either stand still and let new technology bypass the traditional banking system or help shape its future.

A key topic in her address was the recently passed GENIUS Act, which regulates stablecoins. This legislation, signed into law by President Trump, has positioned stablecoins at the forefront of discussions about the future of the financial system. 

According to Bowman, dollar-pegged cryptocurrencies have the potential to disrupt traditional payment infrastructures while offering new opportunities for the banking sector.

In addition to discussing stablecoin regulation, Bowman revealed that she is working on plans to adjust banks’ regulatory commitments according to their size and complexity. 

Fed’s Discontinuation Of Crypto Oversight Program

The Federal Reserve also disclosed last week the discontinuation of its “novel activities” supervision program, which was designed to monitor banks’ interactions with the cryptocurrency and fintech sectors. 

This program, launched in 2023, faced criticism for imposing significant restrictions on banks engaging with digital assets. The Fed has determined that such specialized oversight is no longer necessary, citing an improved understanding of the risks involved and how banks can effectively manage these challenges.

As reported by Bitcoinist, the central bank’s move is part of a broader effort to align with President Donald Trump’s vision of making America the “crypto capital of the world.” 

By incorporating digital asset oversight into its conventional bank supervision framework, the Federal Reserve aims to foster an environment that supports innovation in the financial sector.

Speculation about Bowman’s future role has also emerged, with her name mentioned as a potential successor to current Fed Chair Jerome Powell when his term concludes in May 2026. However, during a recent Bloomberg interview, she deflected questions about her aspirations for that position.

Governor Bowman’s remarks and the regulatory changes she advocates reflect a pivotal moment for the US financial landscape, as regulators seek to balance innovation with the need for safety and stability in the banking system.

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Hong Kong’s financial regulators cautioned investors to avoid making impulsive bets on stablecoin-linked assets after a spate of sharp price swings tied to speculation, corporate announcements, and unverified claims about licensing plans in the city.

In a joint statement, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) said they had observed abrupt movements in share prices of companies linked to the stablecoin concept.

These shifts often followed news reports, social media posts, or statements suggesting that firms planned to apply for a stablecoin issuer licence, engage in related activities, or explore such initiatives locally. Some claims referenced discussions with the regulators themselves.

High bar for stablecoin licensing

Hong Kong introduced its stablecoin licensing regime earlier this year as part of a broader push to establish the city as a regulated hub for digital assets.

The HKMA said it applies a “rigorous and prudent” approach to reviewing applications, with stringent approval criteria and an expectation that only a small number will be granted in the initial phase.

HKMA Chief Executive Eddie Yue said dozens of parties have engaged with the regulator about licensing, but stressed that early communication and simply filing an application are not indicators of likely approval.

The process includes meeting capital, governance, risk management, and operational requirements designed to ensure the safety and stability of licensed stablecoins.

Investors cautioned

The SFC urged investors to remain clear-headed, conduct thorough research, and avoid decisions based solely on short-term price momentum or unsubstantiated online claims. It warned that volatility driven by hype could expose retail traders to significant losses.

SFC Chief Executive Julia Leung said the regulator will continue to monitor trading closely through its dedicated market surveillance team, which uses advanced systems to detect and investigate potential manipulation. She added that the agency intends to take strict enforcement action against any deceptive or misleading conduct.

The regulators also reminded companies and market participants to avoid making public statements that could mislead investors or create unrealistic expectations, noting that maintaining transparency and accuracy is critical to safeguarding market integrity during the rollout of Hong Kong’s stablecoin framework.

JPMorgan’s latest research indicates that international regulators are more inclined to support tokenized deposits, particularly those that preserve the existing structure and stability of fiat-based banking systems, The Block reported on July 18.

According to the Wall Street lender, financial regulators outside the United States are showing a growing preference for tokenized bank deposits over stablecoins.

The trend highlights a shift in how traditional finance seeks to adapt digital technologies without compromising core regulatory and systemic safeguards.

The research, led by JPMorgan’s Nikolaos Panigirtzoglou, highlights how central banks and regulators, including the Bank of England, are leaning toward digital instruments issued by commercial banks that remain fully integrated within the existing financial system.

These tokenized deposits operate on blockchain infrastructure while maintaining the foundational protections of traditional deposits, such as access to central bank liquidity, capital buffers, and compliance with anti-money laundering rules.

Stability and control concerns

The version of tokenized deposits attracting the most regulatory support is the non-transferable kind, also known as non-bearer deposits, which are settled between accounts at full face value.

These instruments minimize the risk of price deviation and preserve uniformity across forms of money, a concept often referred to as the “singleness of money.”

In contrast, stablecoins and transferable (bearer-style) digital deposits can be subject to fluctuations in market value due to credit concerns or liquidity mismatches. Additionally, past market failures have raised red flags about the potential volatility of privately issued digital currencies.

While stablecoins remain more widely used in crypto markets due to their ease of transfer and broad liquidity, JPMorgan’s report noted that such assets often keep their backing within the traditional banking system by investing in instruments like short-term government debt.

As such, they do not represent a true exit from the regulated financial framework.

Diverging paths

In regions like the UK, regulators have questioned the viability of allowing commercial banks to issue stablecoins, especially under frameworks that might require them to hold central bank reserves without generating yield.

JPMorgan’s analysis suggested that such conditions would reduce incentives for banks to issue their own stablecoins.

Meanwhile, U.S. policymakers are taking a different stance. The expected passage of the GENIUS Act, a legislative effort led by President Donald Trump, would allow banks to issue stablecoins directly and promote their use in domestic payments.

This signals a more open approach to integrating stablecoins within the broader financial ecosystem.

JPMorgan itself is exploring tokenized solutions through JPMD, a permissioned deposit coin currently being piloted on Base. The lender is also testing the waters with stablecoins behind closed doors.

The bank filed a trademark for the deposit token product in June, pointing to potential applications in settlement, programmable finance, and cross-bank transfers.

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Robinhood’s private equity tokens, offering exposure to tech stocks like SpaceX and OpenAI, have triggered regulatory scrutiny in Europe after OpenAI raised concerns and said that the digital assets do not represent equity ownership in the company, CNBC reported on July 7.

The Bank of Lithuania, which serves as Robinhood’s primary regulator in the European Union, confirmed it is seeking detailed clarifications before assessing the products’ legality.

A spokesperson for the central bank told CNBC:

“Only after receiving and evaluating this information will we be able to assess the legality and compliance of these specific instruments.”

The controversy centers on Robinhood’s recent announcement of an expansion into tokenized securities, including plans to issue over 200 tokenized U.S. stocks and ETFs for European investors.

The brokerage announced plans to launch its private equity tokens and a new layer-2 blockchain on June 30, positioning itself as a major player in the rapidly growing tokenization sector.

However, OpenAI has distanced itself from the tokens, warning investors that Robinhood’s so-called OpenAI tokens do not provide any equity stake or direct ownership rights in the company.

The scrutiny comes as financial institutions ramp up efforts to capture a slice of the tokenization market, which is valued at over $24 billion as of June 30.

Although tokenized private credit and U.S. Treasury debt currently dominate the sector, accounting for the majority of value, tokenized equities remain a small but potentially fast-growing segment, with just $188 million in current market share.

Major players such as BlackRock and Franklin Templeton have also entered the tokenization space, issuing tokenized money market funds and exploring blockchain-based settlements to improve efficiency and transparency.

However, despite the optimism, legal and regulatory uncertainties remain significant. Regulators and lawyers continue to debate whether tokenized equity instruments require full securities registration or if derivative-like structures are sufficient to meet compliance standards in Europe and the U.S.

For Robinhood, the regulatory probe in Lithuania could set an important precedent as the brokerage seeks to roll out its tokenization framework globally.

Its recent presentation at the EthCC conference in Brussels outlined plans to tokenize a wide range of financial instruments, but the backlash highlights the fine line between innovation and investor protection in the fast-evolving digital asset market.

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Rachel Wolfson

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Rachel Wolfson

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Rachel Wolfson has been covering the cryptocurrency, blockchain and Web3 sector since 2017. She has written for Forbes and Cointelegraph and is the host and founder of Web3 Deep Dive podcast.

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June 26, 2025

After being considered the Wild Wild West for years, crypto adoption in the United States is quickly gaining traction.

Most notably, institutions are flooding into the crypto space due to the rise of tokenized treasuries and real-world asset (RWA) tokenization. The current market capitalization of tokenized US treasuries stands at a whopping $7.4 billion.

A number of US states are also looking at implementing a Strategic Bitcoin Reserve (SBR). This would allow states to hold Bitcoin (BTC) as part of their investment strategy. Both Texas and New Hampshire have recently signed a bill to add Bitcoin to their balance sheets.

Moreover, the regulatory landscape in the US is finally becoming crypto-friendly. The US Securities and Exchange Commission (SEC) recently clarified that protocol staking is not a securities transaction under US law when performed under certain conditions.

Policies implemented under the Trump administration have further accelerated the institutionalization of cryptocurrencies. The repeal of The Staff Accounting Bulletin (SAB) 121 has enabled traditional financial institutions to offer custodial services for digital assets. Citibank is actively exploring adding crypto custody, while JPMorgan Chase plans to offer crypto investments to its clients through a third-party custodian.

Crypto Companies Work With Regulators

Although the crypto sector continues to make strides, industry experts believe that none of this would be possible without working with policymakers and regulators.

Margaret Rosenfeld, chief legal officer at Everstake, told Cryptonews that working with US regulators has become essential for cryptocurrency companies.

“Effective crypto regulation depends on more than legal theory, as it requires a deep understanding of the underlying technology,” Rosenfeld said. “Without that technical fluency, there’s a risk of applying legacy financial frameworks to decentralized systems in ways that don’t fit and ultimately hinder innovation.”

Rosenfeld explained that the decentralized staking provider, Everstake, helped to educate the SEC on staking. She noted that this influenced the SEC’s decision to clarify that protocol staking is not a security.

“At Everstake, we didn’t just send lawyers into the SEC – we brought engineers and operators to the table. We explained the technical structure of staking, validator responsibilities, and how non-custodial delegation works. That kind of technical fluency is critical for good policy. Without it, regulators are left applying legacy frameworks to new infrastructure in ways that can miss the mark,” Rosenfeld commented.

Rosenfeld noted that providing both legal and technical insight can help regulators gain a clearer understanding of what they are evaluating.

“Soon after our meeting, the SEC issued guidance acknowledging for the first time that some staking models – like those we operate – fall outside the scope of securities regulation. It was a meaningful step forward and a real example of how collaborative, technically informed engagement can shape better policy,” she said.

Blockchain Advocacy Groups Educate Policymakers

Blockchain advocacy groups also work closely with US policymakers to ensure that legislation is passed to push forward with crypto adoption in the country. Most recently, the Texas Blockchain Council helped push for the passing of the Texas SBR.

Lee Bratcher, founder and president of the Texas Blockchain Council, told Cryptonews that the Texas Blockchain Council worked with legislative champions, policy advisors, and industry stakeholders to ensure that Senate Bill 21 (SB21) was not only technically sound, but also politically feasible.

“The groundwork we’ve laid over the past few years helped pave the way for this breakthrough,” Bratcher said. “Our success was rooted in years of building trust with lawmakers, demystifying Bitcoin, and linking it to core values like fiscal conservatism, sovereignty, and energy innovation.”

Bratcher further remarked that US states should not only tailor their messaging to local political and economic contexts, but also to core ideas. In this case, Bratcher pointed out that the Texas Blockchain Council educated policymakers on how Bitcoin can serve as a modern reserve asset, which he believes is gaining bipartisan traction.

“Given the bi-partisan support for this bill, Texas Governor Abbott determined that it would go into effect immediately rather than the typically September 1st effective date,” Bratcher said.

Texas Senator Charles Schwertner also partnered with the Texas Blockchain Council to pass SB21. Chairman Schwertner told Cryptonews that Texas is currently the only state with a direct $10 million appropriation for acquiring Bitcoin. He added that working with the Texas Blockchain Council enabled him to learn how a SBR allows Texas to diversify its investment approach.

The Texas Blockchain Council further anticipates that the Texas Comptroller’s Office and the Texas Treasury Safekeeping and Trust Company will begin developing a prudent Bitcoin acquisition and custody strategy.

Major US Crypto Exchange Builds Trust With Lawmakers To Boost Crypto Adoption

US-based cryptocurrency exchange Coinbase also regularly dedicates time to educate policymakers.

In February the SEC dropped its lawsuit against Coinbase, ending a contentious years-long legal battle. The leading cryptocurrency exchange has since submitted a number of documents and requests to drive mainstream adoption of cryptocurrency in the US.

For example, the Coinbase website shows that on May 30 the exchange submitted a request to urge the US Treasury to exclude unrealized crypto gains and losses from the Corporate Alternative Minimum Tax (CAMT). CAMT imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of large corporations for taxable years.

In addition to focusing on US policies, Coinbase recently secured a Markets in Crypto-Assets (MiCA) license from the Luxembourg Commission de Surveillance du Secteur Financier. This enables the exchange to offer crypto products across European Union countries and will likely result in further influence on EU crypto regulations.

Challenges To Consider Before Crypto Adoption

While it’s notable that crypto companies and advocacy groups are helping shape US regulations, a number of challenges remain.

For instance, Rosenfeld pointed out that one of the biggest challenges is the technical complexity of blockchain infrastructure.

“When regulators lack technical fluency in how protocols work, it’s easy for overly broad or misapplied rules to take hold – sometimes unintentionally stifling innovation,” she said.

In order to overcome this, Rosenfeld believes that crypto entities need more dialogue that includes not just lawyers and lobbyists, but also engineers and protocol builders.

“Regulators are now willing to listen when industry participants take the time to explain the underlying mechanics. That’s the path forward: collaboration built on mutual education and transparency,” she stated.

Crypto exchanges Coinbase and Gemini are close to securing regulatory approvals granting them access to operate across the EU, Reuters reported on June 16, citing people familiar with the matter.

According to the report, the expectation has intensified tensions among national regulators over the speed and oversight of new licensing under the bloc’s landmark crypto framework.

The EU’s Markets in Crypto-Assets (MiCA) regulation, in force since early this year, allows any member state to issue a license that unlocks the entire 27-nation market.

While hailed as a step toward aligning crypto oversight with traditional finance, some regulators privately warn that inconsistent enforcement risks creating regulatory blind spots for an industry valued at roughly $3.3 trillion.

Gemini looks for Malta approval

According to two sources, Gemini is close to receiving approval from Malta, which has already signed off on OKX and Crypto.com licenses within weeks of MiCA’s rollout. The country argues its quicker process stems from years of experience supervising crypto businesses.

A spokesperson for the Malta Financial Services Authority told the newswire that four crypto licenses have been issued to date, adding that stringent money-laundering checks remain in place.

Meanwhile, one source revealed that the European Securities and Markets Authority (ESMA) has examined Malta’s licensing procedures and is preparing an internal report.

ESMA declined to comment on the matter.

France’s financial markets regulator has publicly cautioned that ESMA’s lack of direct licensing power could spark a “race to the bottom,” as countries compete to attract lucrative crypto business.

Coinbase eyes Luxembourg license

Luxembourg is also expected to grant a license to Coinbase, marking the first approval for a US-listed crypto firm under MiCA.

Coinbase, now part of the S&P 500, employs around 200 staff across Europe and plans to expand its Luxembourg office by more than 20 people this year, a company spokesperson said.

Luxembourg’s financial supervisor did not comment on the pending application, but one official familiar with the matter rejected suggestions that the country’s standards were too lenient, arguing some critics are motivated by competition to lure crypto firms elsewhere.

The EU’s internal split over licensing comes as lawmakers debate expanding ESMA’s authority to ensure consistent enforcement of MiCA rules amid the risks posed by the US deregulating the industry.

While Brussels sets regulatory frameworks, national agencies retain licensing power, a system now under pressure in one of the world’s fastest-moving financial sectors.

The outcome of these approvals could shape how Europe balances investor safeguards with ambitions to be a global crypto hub, as memories of past industry scandals, such as FTX’s 2022 collapse, still loom large over regulators’ efforts to keep pace with innovation.

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